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Italians the latest to say NO to Establishment

To summarize, this is what has happened so far in yet another major overthrow of the political status quo:

Italy PM Renzi lost by a huge margin, with the latest estimate somewhere around 59.3% voting “No” to Renzi’s proposed constitutional referendum.

In a speech moments after the results were announced, Renzi confirmed he would hand in his resignation tomorrow.

As Bloomberg notes, the scale of the loss and how quickly it happened cast a huge shadow on the fate of the continent headed into 2017.

The EURUSD has tumbled to the lowest level since March 2015.

“The experience of my government ends here,” Renzi said in a televised address to the nation after early voting results suggested his ‘Yes’ camp may have lost the referendum by as much as 20 points.

Renzi said he took full responsibility for the “extraordinarily clear” defeat and that on Monday afternoon he would convene his cabinet and then hand in his resignation to President Sergio Mattarella.

Meanwhile, not wasting any time, the man who would likely win an election if one were held today, Five Star founder Beppe Grillo, saidn in a blog post that Italians need elections as soon as possible, adding that the election law for the lower house can be the current one, even though the movement has “always criticized it” and says a new election law for the Senate, with tweaks to make it more governable, can be done in one week.

The result has hit the EURUSD first and foremost:

“Expect volatility premiums to rise and the euro to trade below $1.05 against the dollar, potentially testing last year’s low of $1.0460 in a ‘no’ vote scenario,” Petr Krpata of ING Groep said before the referendum. “While the market is positioning for the risk of ‘no’ vote outcome, a knee-jerk reaction is still likely to be a lower euro” as it would “underline the upcoming risk” of other elections in Europe.

After the referendum, Daisuke Karakama, chief market economist for Mizuho said the EURUSD may fall to 1.02 in January-March period as European elections make investors wary. First reaction to Renzi resigning is EUR selling, JPY buying, but more important event is parliament dissolution and general election in Italy which may not occur until 2017. Daisuke says elections in Netherlands, France, Germany and Italy next year keep euro pressured. He also notes that Italy isn’t a factor-snapping trend of Trump rally and won’t be trigger for all-out JPY buying as market sentiment is somewhere between risk-on and risk-off.

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The rejection of Renzi’s reform means Italy’s government bonds, which have been the euro zone’s worst performers in the past six months, may drop Monday. The bond market opens at 8 a.m. Rome time (2am ET). The yield premium demanded by investors for owning the nation’s 10-year bonds instead of benchmark German bunds surged on Nov. 28 to the most since June 2015, before rebounding last week as Italian stocks also gained.